What earnest money does, how it is credited, and why contract deadlines and wire security matter.

Planning principle: Mortgage decisions should be evaluated using the full payment, cash required, risk, and expected ownership timeline—not one isolated number.

Purpose

Earnest money is a buyer deposit intended to demonstrate seriousness and is governed by the purchase contract and local practice.

Who holds it

It is commonly held by an escrow, title, brokerage, attorney, or other authorized party rather than paid directly to the seller.

Credit at closing

If the transaction closes, the deposit is generally credited within the final cash-to-close calculation.

Refundability

Whether the deposit is refundable depends on the contract, contingencies, deadlines, defaults, and applicable law.

Fraud prevention

Verify wiring or delivery instructions independently. Never rely solely on an emailed change to payment instructions.

Questions to ask before acting

  • What assumptions could materially change the result?
  • How much cash will remain after closing?
  • What happens if taxes, insurance, repairs, or income change?
  • Which terms should be confirmed in writing?

Bottom line

Use this guide as a framework for better questions and more complete comparisons. Actual eligibility, pricing, legal rights, and transaction requirements depend on the borrower, property, lender, program, contract, and location.